What is Deferred like-kind exchange?
In short
In a deferred like-kind exchange, a taxpayer sells real property and buys replacement property later, through a qualified intermediary who holds the sale proceeds so the taxpayer never has access to them.
Key takeaways
- Replacement property must be identified within 45 days and received within 180 days (or by the return due date with extensions, if earlier).
- Identification usually uses the three-property rule or the 200% rule.
- If the taxpayer can get at the proceeds, the exchange fails and the gain is taxed.
Where it's tested
TCP: Property Transactions: Advanced Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A taxpayer sells equipment with an adjusted basis of $60,000 (original cost $100,000, accumulated depreciation $40,000) for $120,000, receiving payments over four years. What is recognized in the year of sale beyond any installment gain on the first payment?